Why Didn't I Learn This in School: Terrible Taxes

Benjamin Franklin famously said: "The only thing for certain is death and taxes."

But what Benny didn't tell us is how confusing those forms can be.

To start, why do we pay taxes? We're all chipping in to fund the many programs and services that make our lives a little easier. You're a dependent if a parent or guardian pays 50 percent of your support, and you live with them for at least half the year.

Factors like your age and how much money you earn determine when you're no longer counted as a dependent -- and need to start paying.

See a guide to the most commonly used tax forms below:

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Guide to commonly-used US tax forms
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Guide to commonly-used US tax forms

The 1040 family of tax forms is for federal income tax and is absolutely essential for all.

The 1040EZ form is the simplest version and is typically filed by those who:

  • Have no dependents
  • Are younger than 65
  • Earned less than $100,000
  • Don’t plan to itemize deductions

Form 1040A is more comprehensive than 1040EZ, but simpler than the regular 1040. It's beneficial for those who earn less than $100,000 and don’t have self-employment income -- but who want to make adjustments to their taxable income, such as child tax credits or deductions for student-loan interest. Note that it doesn't allow for itemized deductions.

Form 1040 is filled out by those who make $100,000 or more, have self-employment income or plan to itemize deductions.

The W-2 is completed by employers document each employee's earnings for the calendar year. You will want to take a look at this tax form for important information you'll need to fill out your 1040, 1040A or 1040EZ. 
The 1098 form is filled out by those who:
  • paid interest on a mortgage
  • paid interest on a student loan 
  • paid college tuition
  • donated a motor vehicle to charity

The 1099 series is reports all income that isn’t salary, wages or tips, and must be reported on both the state and federal level.

1099-DIV reports dividends, distributions, capital gains and federal income tax withheld from investment accounts, including mutual fund accounts.

1099-INT trakcs interest income earned on investments.

1099-OID (Original Issue Discount) is provided if you received more than the stated redemption price on maturing bonds.

1099-MISC documents self-employment earnings, as well as miscellaneous income such as royalties, commissions or rents. It covers all non-employee income that is not derived from investments.

If you receive a refund that you're unable to pay in full, you can request a monthly installment plan using Form 9465.
Don't forget to notify the IRS if you move! Use Form 8822 to change your address with the Internal Revenue Service. Otherwise, notices, refunds paid with a paper check and other correspondence relating to your personal, gift and estate taxes will be sent to your former address.
Anyone who has been employed by a company has completed a Form W-9. The W-9 is used by employers for payroll purposes -- and the information on the W-9 is used to prepare employee paychecks during the year and W-2 forms at the end of the year. 
The W-4 is an IRS form completed for employers know how much money to withhold from your paycheck for federal taxes. Accurately completing your W-4 can both ensure you don't have a big balance due at tax time and also prevent you from overpaying your taxes.
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Let's dive into the two most common forms you'll face: The W-2 and the I-9. The I-9 is nothing to be scared of -- every time you get a job, you'll have to fill one out. It's your name and social security number to prove you're eligible to work. If you've been paid at least $600 to work from an employer, they're sending you a W-2 at the end of the year.

1099 forms are typical for freelancers. 1099 forms don't withhold taxes, so be ready to pay more when the time comes.

By law, your employer will mail your tax documents to you by January 21st of that tax year.

The 3 most common forms are 1040EZ if you make less than $50K, 1040A if you make less than $50K with the option of more income sources, and 1040 (nicknamed the "long form") if you make more than $50K and need to itemize.

To itemize, you'll need one more form -- a Schedule A of your 1040. This means you could have a ton of deductions from your gross income before you pay taxes, which means you pay less.

The deadline for taxes is April 15. You can get an automatic extension for October 15, but this is an extension for filing -- not paying.

Everybody has to pay taxes but knowing what forms to fill out - and when - can keep you from paying more than you have to.

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